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Summary
- Value contribution from travel stocks is highly dependent on how well and soon the health authorities are successful in getting the COVID-19 pandemic under control.
- Though Government stimulus packages and an effective treatment/vaccine can turn the table of travel stocks, diversification in the business line is an efficient and promising way to get them to shine again.
- Aeronology and WebBeds disclosed a strategic partnership to offer the travel agent community the opportunity to book hotel rooms through the online business application of Aeronoly.
- Qantas Frequent Flyer and Afterpay Limited will launch an exclusive new partnership that will allow Qantas Frequent Flyers to get Qantas Points.
- The diversified businesses of Helloworld Travel are positioned to benefit from a recovery in 2021 and 2022.
The travel industry has been amongst the hardest hit as the coronavirus pandemic spread around the world, with various restrictions and quarantine measures keeping people from travelling to vacation and business destinations. Once the hope of getting started was seen but again from last few days, the industry is in deep fear arising from the second wave of COVID-19 pandemic, which shall get travel companies to a position where they will take years to recover.
Travel in the current scenario is highly dependent on the healthcare sector. Economies are not opening travel until they get a go-ahead from the Health ministry. Much awaited discovery of vaccine or treatment for COVID-19 will hit a golden buzzer for travel stocks.
Let us discuss 3 triggers that will help the hard-hit travel industry to stand back on its feet-
- Prevention and control of COVID-19- The most important aspect that would trigger the revival of travel stock is to control and prevent the spread of COVID-19. Hence, everyone should follow all the protocols to control the spread of coronavirus.
- Safe and effective treatment/vaccine- At this time, every industry has high hopes from the healthcare companies for developing a safe and effective treatment/vaccine for COVID-19. Once the drug or vaccine has undergone all trails and finally produced, it will turn the table for travel stocks.
- Stimulus package and bailout- Federal stimulus packages help to restructure the businesses during any crisis. After the Australian Federal government revealed that it is providing airlines with an economic relief package, the expectations rise in the travel and tourism industry.
Let us discuss four ASX listed travel stocks- FLT, WEB, QAN, HLO
Flight Centre Travel Group Limited (ASX:FLT)
FLT is one of the world’s largest travel groups Flight Centre Travel Group Limited employing more than 20,000 individuals around the world, owning over 30 brands.
The vast leisure and corporate travel sales network of the company extend throughout four major regions Australia and New Zealand, the USA, EMEA, and Asia.
On 1 July 2020, Flight Centre Travel Group updated securing access to a debt facility of nearly £65 million, which will be drawn as and when required to help offset the impacts of COVID-19 pandemic on its UK business.
As per the previous announcement, the funding has been made available to FLT via the COVID Corporate Financing Facility of Bank of England, a program that has been employed to provide short-term liquidity among firms as they work to overcome disruption induced by the ongoing turmoil and the restrictions that are in place for reducing the spread of infection.
The initial notes issued under the facility will mature in March 2021 and should be capable of being extended for a further 12 months through the issue of further notes under the facility.
Stock Information: On 16 July 2020, FLT stock ended at A$10.760 climbed by 3.462%, having a market cap of A$2.07 billion, with 198.97 million shares trading on ASX.
A digital travel business Webjet Limited provides online travel booking services in Australia, New Zealand, Europe, and other countries. The Company supplies lodging to the travel industry via its WebBeds group.
Aeronology and WebBeds Joined Forces
On 15 July 2020, two Australian travel companies Aeronology and WebBeds (a subsidiary of Webjet Limited) disclosed a strategic partnership to offer the travel agent community the opportunity to book hotel rooms through the world-class online business application of Aeronology.
Both the companies consented to terms to allow the users of Aeronology app to book live WebBeds inventory into their air bookings.
Successful settlement of €100 million convertible notes
On 1 July 2020, Webjet offered €100 million convertible notes due 2027 to maintain strong balance sheet in challenging COVID-19 environment. The proceeds will also be used for repaying the existing debt of A$50 million and extending the maturity of the remaining debt facility to late 2022 along with other capital management decisions.
On 10 July 2020, the Company disclosed the successful settlement of the issue of €100 million. These notes will be listed on the Singapore Stock Exchange (SGX) Securities Trading Limited on 13 July 2020.
Stock Information: On 16 July 2020, WEB stock closed 1.351% higher at A$3.00 with a market cap of ~A$1 billion.
Qantas Airways Limited (ASX:QAN)
Qantas Airways Limited is engaged into the operation of the sale of domestic as well as worldwide tours, domestic air transportation services, and associated support activities such as catering, information technology, engineering & maintenance, and ground handling.
Afterpay’s new partnership with Qantas
According to an ASX announcement dated 6 July 2020, Qantas Frequent Flyer and Afterpay Limited (ASX:APT) will launch an exclusive new partnership that will allow Qantas Frequent Flyers to get Qantas Points with the BNPL platform.
After launching this, Qantas Frequent Flyers could earn up to 5k Qantas Points on linking their membership number to their Afterpay account.
On 14 July 2020, Qantas group disclosed that it had extended closing date of SPP, announced on 25 June 2020, by two weeks to 5 August 2020. With this extension, all eligible shareholders of the Company have additional time for participating in the SPP. The funding will be used to strengthen the balance sheet and implement and support a recovery plan post COVID-19.
Stock Information: QAN stock ended at A$3.700 up by 1.648% on 16 July 2020 with the market capitalisation of A$6.78 billion, having 1.86 billion shares outstanding.
Helloworld Travel Limited (ASX:HLO)
ASX-listed travel agency company Helloworld Travel Limited is a leading travel distribution company across Australian & New Zealand. The Company comprises retail travel networks, destination management services, corporate travel management services, air ticket consolidation, online operations, and wholesale travel services.
Helloworld Travel Reveals A$50 Million via Equity Raising
Helloworld Travel introduced a fully underwritten capital raising of nearly A$50.0 million to raise its balance sheet flexibility and to offer liquidity to help it manage the extended period of interruption to the global travel industry.
The equity raising comprises of an institutional placement and an entitlement offer. The placement ~A$27.1 million is fully underwritten and will be offered to institutional investors at $1.65 per share, and the entitlement offer will be of ~A$22.9 million.
After completion of the equity raise, the Company will have sufficient liquidity for operating as well as capital expenditure through to the end of 2022, believing ongoing disruption.
The diversified businesses of Helloworld include a mix of domestic as well as international corporate travel, leisure travel, and wholesale travel operations. These businesses are positioned to benefit from a recovery in 2021 and 2022.
Notably, Helloworld is already witnessing a rise in domestic air, and land bookings, aligned to planned capacity raises by the domestic carriers. The corporate business of the Company comprises 70% domestic TTV and is climbing week by week as borders restrictions have eased.
Stock Information: On 16 July 2020, HLO quoted at A$1.965 in-line with its previous close. The market capitalisation of the stock remained at A$245.08 million.
